This month, China held a "D20" summit of its top dairy companies to bolster confidence in the industry which is still living under the shadow of the melamine adulteration incident that poisoned infants in 2008. Government officials hope to revitalize the industry by anointing a group of strong companies who agree to vigilant quality control, self-regulation, to invest in modern farms, acquire high-producing cows, plant forage crops, and build reputable brand names.
The forum was addressed by top officials--Vice Premier Wang Yang, Minister of Agriculture Han Changfu, and a retired vice minister who heads the dairy industry association. It was held at the presigious Diaoyutai guesthouse in Beijing. Setting the tone for the conference, Minister Han praised the industry's achievements in recovering from the 2008 crisis, but acknowledged that the Chinese dairy industry faces quite a few challenges and difficulties.
The 7-year overhaul of the dairy industry--encouraged by government subsidies and action plans--boosted product quality, said Minister Han. Milk tested free of melamine and other forbidden additives this year, and all milk from the "above-scale" farms meets national standards for protein and fat. The head of the inspection and quarantine agency boasts that the quality of Chinese dairy products has never been better.
Minister Han--after reciting achievements--acknowledged that some Chinese dairy companies do not produce high-quality products, consumers still lack confidence in Chinese dairy products, cheaper imported milk is pressuring the industry, and resource constraints hinder the industry's growth. Nevertheless, Minister Han insisted that the industry must "wave the banner of safety and quality," revitalize the industry, and regain consumers' confidence.
A more candid assessment of the dairy summit remarked that the industry faces a "protracted war" to revitalize itself. Despite being the third-largest dairy industry in the world, imports have increased six-fold over six years and China imports a third of its milk supply, this commentary noted. The severe lack of confidence in domestic milk products is reflected in dairy industry association data showing that only one-fourth of the nation's infant formula supply is produced domestically. Chinese parents went to extraordinary lengths to procure infant formula they could trust from supermarkets in Hong Kong and even Europe.
The lack of confidence in Chinese infant formula got attention from the highest levels of Chinese leadership. In May 2013, Premier Li Keqiang chaired a meeting that pondered ways to rebuild confidence in Chinese infant formula. The revitalization of the dairy industry was a topic of discussion at this year's National Peoples Congress.
Minister Han explained that the government's strategy is to let companies play the main role as self-regulators with the government playing a secondary role. The "D20" summit was attended by Chinese companies who are expected to form the industry's core: Yili, Mengniu, Modern Dairy, Guangming (Bright), Liaoning
Huishan Dairy, Shengmu, Sanyuan Foods, Zhongken Dairy, Wandashan, Shijiazhuang
Junlebao, New Hope Dairy Holdings, Heilongjiang Feihe (Firmus), Beingmate,
Nanjing Weigang, Tianjin Jialihe Muye, Xinjiang West Region Spring, Fujian
Changfu, Henan Huahua Niu, Jinan Jiabao Milk, and Xi’an Yinqiao (Silver Bridge). It's not clear who drew up the guest list. Presumably, no foreign-invested companies were invited.
The unspoken theme of the Beijing dairy summit was voiced by the commentary. The government's vision is to drive small, unreliable companies out of business while creating 3-to-5 big Chinese companies. Foreign-invested companies will be forced to "obey China's monopoly law." Breaking the "monopoly" of foreign milk suppliers is a chief objective. Chinese companies hope to "overcome foreign companies like Mead Johnson, Abbott Labs, and Dumex that have dominated the market for so long."